Legislative Analyst's Office Analysis of the 2002-03 Budget Bill

Other K-12 Issues

Independent Study

The Governor's budget proposes to reduce by 10 percent the funding rate for students served through independent study by noncharter schools because of claims that nonclassroom-based instruction is less expensive than instruction in a classroom setting. Through independent study, students may receive attendance credit for work completed outside of the classroom under the supervision of a certificated teacher. Teachers must determine the "time value" of the work that a student submits for attendance credit through independent study.

The budget estimates that the rate reduction would save the state $42 million annually. The Governor's reduction assumes that approximately 89,800 average daily attendance (ADA) are served annually through independent study. This represents around 1.5 percent of statewide ADA. The Governor's proposal would implement the rate reduction by counting a full day of independent study as nine-tenths of an ADA, thereby reducing funding for revenue limits and ADA-based categorical programs.

Independent Study Proposal Excludes Charter Schools. The Governor's proposal excludes charter schools because of recent legislation that would potentially reduce funding for independent study offered by charter schools. Chapter 892, Statutes of 2001 (SB 740, O'Connell), requires the State Board of Education (SBE) to develop a policy to review funding for charter schools providing 80 percent or less of their instruction in a classroom-based environment. The SBE must review these charter schools and take one of the following three actions:

• Elect not to fund a charter school for its nonclassroom-based instruction.
• Reduce the school's funding rate by 10 percent in 2001-02, 20 percent in 2002-03, and 30 percent in 2003-04.
• Continue to fund the charter school at a non-reduced funding rate.

We have two main concerns with the Governor's proposal:

• Proposed savings assume more ADA is served through independent study than the State Department of Education's (SDE) data support.
• The administration is not able to provide information to show that the costs of independent study differ from classroom-based education.

These issues are discussed below.

Lack of Cost Data Makes It Difficult to Evaluate Proposal

Our analysis indicates that the budget overstates expected savings from its independent study proposal by at least $13 million. We withhold recommendation on the reduction of the funding rate for independent study until the administration provides, and the Legislature reviews, better data justifying the remaining $29 million of expected savings.

The Department of Finance (DOF) savings estimate assumes that 89,800 ADA would participate in independent study in school districts and county offices of education in 2002-03. We have concerns, however, regarding DOF's estimate of savings related to school districts. Problems with the data include:

• Charter School Enrollment Included in DOF Data. The DOF bases its estimate of savings on the independent study enrollment collected in the California Basic Education Data System (CBEDS). The CBEDS independent study enrollment data include charter school enrollment. Since the Governor's proposal excludes charter schools, potential savings from the DOF estimate are too high.
• Enrollment Versus ADA. The DOF estimates are based on enrollment rather than ADA. Statewide, students
• attend school around 95 percent of the time on average. Therefore, ADA generally is around 5 percent less than associated enrollment.
• Assumes No Change in Level of Service. If the independent study-funding rate is reduced, some school districts may choose to offer less instruction through independent study, and commensurately more in classrooms. Any reduction in the level of independent study offered by school districts therefore would result in a reduction in achievable savings.

The SDE provided us with independent study attendance data that excluded charter school attendance. Based on the SDE attendance data, we estimate that noncharter school independent study attendance in 2002-03 would be 56,700—with 51,000 ADA in school districts and 5,700 ADA in county offices of education. As a result, we estimate that the budget overstates the expected savings from its proposal to reduce the funding rate for independent study by at least $13 million.

Lack of Independent Study Cost Data. The administration not only has overstated savings, it is unable to provide any cost data to support its general contention that the per-pupil cost of independent study is cheaper than classroom-based instruction. Our analysis indicates that the cost of providing independent study may be lower than classroom-based instruction in some cases (such as facility costs), similar in other cases (teaching costs), and higher in yet other situations (instructional materials). However, without district level budget data, it is difficult to determine whether funding currently provided for independent study, on balance, exceeds the costs. The administration should collect budget data for a sample of school districts and provide these data to the Legislature prior to budget hearings. We withhold recommendation on the reduction of the funding rate for independent study pending review of this data.

Eliminate Reading Incentive Programs

We recommend deletion of $4.75 million for the Governor's Reading Award Program and the California Reads program. (Reduce Item 6110-147-0001 by $4.75 million.)

The budget includes $4.75 million from the General Fund (Proposition 98) to continue the Governor's Reading Award program ($4 million) and the California Reads program ($750,000) in the budget year.

Governor's Reading Award Program. Chapter 2x, Statutes of 1999 (AB 2x, Mazzoni), established the Governor's Reading Award program. Currently in its third year, the program provides competitive awards to K-8 schools based on the number of books students read. Winning schools receive a maximum grant award of $5,000. Although program funds are appropriated to the Department of Education (SDE) and the department distributes the awards, it is the Office of the Secretary for Education (OSE) that selects the winning schools. The OSE indicates that most winning schools use awards to purchase books. We have two main concerns with the program.

• Program Unlikely to Improve Instruction. Given the small size of the grants and the fact that winning schools use awards for one-time purchases, it is unlikely the program has an impact on the quality of instruction provided for students.
• Program Focuses on Quantity Not Quality. The program's goal is to serve as an incentive for students in grades K-8 to read. Schools receive funds based on the average number of pages or books reported to have been read per pupil. However, what is important is not how many books a student reads but that they enjoy and comprehend what they read and develop a positive attitude towards reading. Because this program does not focus on reading content or comprehension and treats reading as a competitive activity, it is unclear if this program is a cost-effective use of $4 million annually to foster better reading skills and accomplishment.

California Reads Program. California Reads is a collaborative program among the Governor's office, SDE, the federal Eisenhower State Grant program, and Books and Beyond Nonprofit Corporation. The program encourages recreational reading by K-8 students through various activities such as read-a-thons, parental involvement activities, and professional development. In the read-a-thons, for example, schools set up a bulletin board charting the reading progress of each participating child. Students receive incentive "prizes," such as pencils, as they move along the board.

Recommendation. We recommend that the Legislature delete funds for both programs because:

• The effectiveness of the programs is unknown.
• Elimination of the programs would not have an impact on the quality of instruction or the level of services provided for students.
• School districts can provide similar reading award activities, if they choose, from various local funding sources.
• The $4.75 million can help the Legislature meet other education priorities in a difficult fiscal year.

In addition, California will be receiving a substantial amount of federal funds in the budget year for reading instruction and professional development. Thus, the Legislature has other opportunities in the budget year to highlight reading and to focus on the quality rather than the quantity of reading.

High-Tech High Schools

We recommend that the Legislature eliminate the second-year appropriation for the selected high-tech highs because these schools will receive funding in the current year to enable them to leverage private funding sources for 2002-03. (Delete $4 million in Item 6110-485, Schedule 1.)

The state provided $10 million in the 2001-02 Budget Act for a new program to provide one-time start up grants to ten eligible school districts or charter schools (five in 2001-02 and five in 2002-03) for purposes of establishing high-tech highs. The Governor and the Legislature have since modified the proposal to provide only $10 million in grants (five grants of $2 million each) to be awarded over 2001-02 and 2002-03. The program was appropriated $6 million in the current year, with budget-year funding contingent on an appropriation in the 2002-03 Budget Act. For 2002-03, the Governor proposes $4 million for the high-tech high program.

Background

A high-tech high is a public comprehensive high school maintained by a school district or charter school that offers a rigorous college preparation program emphasizing math, science, and engineering. Technology is integrated throughout the curriculum. Two high-tech highs opened in California within the last several years—a high school in Napa (1996) and a charter high school in San Diego (2000).

Concerns With Budget-Year Appropriation for High-Tech Highs

As we noted in our Analysis of the 2001-02 Budget Bill, we have the following concerns with this program:

• Significant Additional Costs. Because these types of schools have lower student-to-computer and teacher-to-student ratios and require frequent technology upgrades, they face significant additional costs compared to more traditional public schools.
• Questionable Cost-Effectiveness. These types of high schools typically serve about 200 to 300 students and incur extraordinary start-up and annual operating costs. We question whether the benefit of this approach justifies the additional costs.
• Is Additional Involvement Necessary. Both existing high-tech highs receive sizable private donations and federal funds that support both start-up and ongoing costs.

Due to these concerns, and given the state's fiscal situation, we recommend the Legislature eliminate the budget-year appropriation for high-tech highs. If the current-year funds ($6 million) are evenly distributed, the five grantees would receive about $1.2 million each to establish their programs. This funding should help them leverage private funding sources for 2002-03. We think that there are sufficient alternative funding sources available to these schools that make the budget-year appropriation unnecessary. Moreover, these schools will need to find alternative funding sources to cover the high cost of running their programs in the future. In view of the above, we recommend the Legislature use the $4 million proposed for high-tech highs for other state priorities.